Accountancy Part AAccounting for Shares

Calls in arrears are shown in the balance sheet as:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → A deduction from the paid up capital

Calls in arrears are amounts called up on shares but not paid by some shareholders. In the notes to accounts on share capital they are shown as "Less: Calls in Arrears" below the called-up capital, and the figure left after the deduction is the paid-up capital. So they appear as a deduction in arriving at the paid-up capital, never as an asset or a liability.

Option (1) Current assets — Incorrect. Unpaid calls are not shown as an asset; they reduce the share capital shown.

Option (3) Current liability — Incorrect. The company owes nothing to the defaulting shareholder; it is the shareholder who owes the company.

Option (4) Reserve and surplus — Incorrect. Reserves and surplus hold profits and premiums; calls in arrears are unpaid share money.

NCERT (2026-27 edition):
Categories of Share Capital – “… Paid up Capital: It is that portion of the called up capital which has been actually received from the shareholders. When the shareholders have paid all the called amount, the called up capital is the same to the paid up capital. If any of the shareholders has not paid amount on calls, such an amount may be called as ‘calls in arrears’. Therefore, paid up capital is equal to the called-up capital minus call in arrears.”